BorgWarner at J.P. Morgan Auto Conference: Strategic Shift in Electrification

On Wednesday, 13 August 2025, BorgWarner Inc. (NYSE:BWA) presented at the J.P. Morgan Auto Conference 2025, shedding light on its strategic direction amid a rapidly evolving automotive landscape. The company reported robust growth in its e-products segment, while addressing challenges such as tariffs and market shifts. BorgWarner is committed to balancing shareholder returns with investment in electrification and strategic acquisitions.

Key Takeaways

• BorgWarner reported a 31% increase in light vehicle e-product growth in Q2.
• The company plans over 30 e-product launches between last year and the end of this year.
• BorgWarner aims to achieve a consistent EBIT margin profile of 10% or higher.
• The company returned $130 million to shareholders through dividends and share repurchases in Q2.
• BorgWarner expects 100% recovery from tariff impacts through customer agreements.

Financial Results

• Q2 Performance:

- EBIT margin reached 10.3%, surpassing expectations by 60 basis points.

- A year-over-year sales decrease of $30 million, with an $8 million income drop, partly due to exiting the charging business.

- Underlying EBIT margin improved by 30 basis points despite flat organic sales.

• Capital Allocation:

- BorgWarner increased its share repurchase authorization by $641 million, totaling $1 billion.

- Dividends saw a 55% increase, reflecting the company’s commitment to returning capital to shareholders.

- The company anticipates generating approximately $750 million in free cash flow at the midpoint of its guidance.

Operational Updates

• Electrification Strategy:

- Focused growth in China and Europe, with combustion and hybrid vehicles expected to dominate the U.S. market in the near to midterm.

- BorgWarner exited the charging business due to market fragmentation and slower growth.

• Market Share:

- Aiming to outpace market growth across its entire portfolio, leveraging foundational and e-products.

• China Business:

- 20% of BorgWarner’s sales occur in China, with 75% of that with local OEMs.

• Commercial Vehicle Market:

- The segment comprises 16% of the overall business, with a noted slowdown in demand.

Future Outlook

• Revenue Growth:

- BorgWarner expects to grow over market by 1% to 1.5% this year.

• Electrification:

- Anticipates European regulations by 2030 will boost bus electrification.

• M&A Activity:

- The company is actively pursuing acquisitions with strong industrial logic and accretive potential.

Q&A Highlights

• Tariffs:

- BorgWarner aims for complete tariff recovery from customers, with 70% already covered by agreements.

• Electrification:

- OEMs’ clarity on cycle plans has increased RFQ flow, although BEV is not seen as a primary growth driver in the U.S. midterm.

• Capital Allocation:

- Consistency and discipline in returning cash to shareholders remain a priority.

For a detailed understanding of BorgWarner’s strategic insights and financial performance, please refer to the full transcript below.

Full transcript - J.P. Morgan Auto Conference 2025:

Unidentified speaker: Joining Thanks us for our next session. Very excited to get going with Borg Warner including we have President and Chief Executive Officer Joe Fadul to my seated to the right of me, the way you’re looking. And then Craig Aaron, Executive Vice President and Chief Financial Officer and at the end Pat Nolan, Vice President of Investor Relations. I think we’re going launch right into Q and A. Is that the plan?

Joe Fadul, President and Chief Executive Officer, BorgWarner: Great.

Unidentified speaker: Okay, great. My first question is on the impact of tariffs for the industry overall and for your company in particular. How have you managed the direct impact so far? And how are you thinking about the direct impact going forward, the indirect impact in terms of like the potential for demand destruction as automakers presumably eventually raise prices? Have you changed your estimate of normalized U.

S. Light vehicle sales or normalized North America production as a result of tariffs?

Craig Aaron, Executive Vice President and Chief Financial Officer, BorgWarner: Yes. I’ll grab that one. So when you think about tariffs, our exposure has come down throughout the year. So when we did our April call, we communicated 1.6% of sales. We’ve seen that come down to 1% of sales.

Couple reasons why. First, regulations have moved in our favor. The second is our teams have done a fantastic job to really find creative solutions to mitigate tariffs altogether. So my hats off to them. Our guidance implies 100% recovery from our customers.

As we sit here today, we have agreements in place that cover about 70% of our overall exposure. We’re working on the remaining 30%, and we expect to have that in short order. When you think about tariffs overall from our seat, for us, we think it’s a very manageable issue. What we’re more cautiously optimistic about is volumes in North America in the back half of the year. Right now, those production schedules seem to be normal, but we need to watch and really watch that as we get to the back half of the year.

Unidentified speaker: Good to hear. Thank you. My second question is to ask what your very latest outlook is for vehicle electrification, including in light of some of the recent changes to the regulatory backdrop, such as the elimination of the $7,500 US federal consumer tax credit and the relaxed enforcement of greenhouse gas and corporate average fuel economy standards? Has your outlook evolved recently? And in what ways might you be running the business or allocating capital any differently as a result?

Joe Fadul, President and Chief Executive Officer, BorgWarner: Yeah. So good morning, everyone. I think when it comes specifically to the changes in this market, it’s fair to say that electrification is not playing loudest here. If we look across the globe, we start to see the regions are pursuing different paths. China continues to be the market where electrification is strongest, and we’re winning and doing quite well there, followed by Europe, where we do see some increases year over year in the electrified side, especially in BEVs.

In this particular market, what we’re seeing is, first of all, the OEMs have much more clarity in their own cycle plans than they did a year ago. So that’s resulted in higher RFQ flow. And some of those programs are extensions of current business, which were some of the awards that we mentioned. Some are new applications, like in the hybrid space or advanced hybrid space, which we also won some business. So we see in this market for the near to midterm, it’s going be mainly a combustion and hybrid with some opportunities in bev, but bev won’t be the primary growth driver in the midterm.

Unidentified speaker: Great. Thank you. And despite that, I wanted to ask on the drivers of your strongly higher e product revenue. There has been a lot of talk of EV slowdown in the industry, rightfully so. Not that we’ve gone backward, but we’re decelerating.

We’re not going forward as quickly as we’d imagined. According S and P Global Mobility in 1Q this year, global hybrid electric vehicle, plug in hybrid electric vehicle and battery electric vehicle production grew 25% year over year, while your e product revenue to support those vehicles rose 47% year over year, some 22 points faster. And in 2Q, with HEV, PHEV and BEV production up 17%, your e product sales rose 31%, 14 points faster. So could you speak to the drivers of e product growth as well as outgrowth?

Joe Fadul, President and Chief Executive Officer, BorgWarner: So first of all, we’re really pleased with our performance in the first half of the year, especially when you look at the growing e product segment. In the second quarter alone, as you mentioned, we were up 31%, which was nearly double what those end markets were doing. So great results by our team. For us, what we need to keep in mind is between last year and by the end of this year, we’ll have over 30 e product launches, which are really the basis of that growth. Why are they choosing BorgWarner?

There’s a couple of things. One, having very competitive technology in this space. If you think about inverters and motors, high voltage coolant heaters, these are areas we’ve been working on and growing in scale. Second is our deep customer intimacy. We’re fortunate over many years we built a very diverse customer portfolio.

And through that, we continue to have really good customer intimacy. So serving those customers, whether it’s on the foundation side or the e product side, they know and trust BorgWarner to launch those products successfully and help them be successful. There are some nuances in certain markets like in China where speed to market is very important. And I think through our decentralized operating model, our teams are able to run very fast in China and keep pace with those OEMs, which also leads to some of the success we see.

Unidentified speaker: The outgrowth seems to imply that you’re gaining market share. Do you have a sense as to who you might be gaining that share from? Is it from other suppliers or an automaker’s in house supplier?

Joe Fadul, President and Chief Executive Officer, BorgWarner: Yeah. The growing of market share on one hand is important for us because we want to build scale across all of our products. If you step back, one of the changes we made twelve months ago in our strategy was to outgrow our end markets across the entire portfolio, so not just focused on the e products. So when you think about foundational business, where we’re number one or number two in the space, we do see opportunities to outgrow our end markets, partly due to penetration increases. But also, we see some of the smaller players are going to struggle to keep up.

They won’t have the same scale that’s needed. They won’t be able to reinvest in those businesses like many of our customers expect. So growing market share and enhancing our market position is going to be a likely outcome due to our strategy.

Unidentified speaker: Great. Thanks. I wanted to dig in on the margin strength in 2Q. You also announced a number of awards and an increase in the dividend and share repurchase authorization. But from my conversations with investors, seems like the margin strength was probably the biggest contributor to the share price outperformance.

So maybe to just unpack those drivers a little bit of the stronger underlying margin. EBIT margin of 10.3%, it was 60 basis points higher than the Street was looking for. It was down 10 bps year over year, but 40 bps was from the tariffs, which you expect to recoup in the back half. So it’s kind of 30 bps higher on an underlying basis on flat organic sales. So help us understand like what were the drivers of that stronger underlying improvement?

You did discuss on the call productivity, restructuring savings and supply chain savings as well as higher quality, which led to lower warranty expense. But are you able to maybe dimension some of these drivers for us and give us a sense of the relative sustainability of the different drivers?

Craig Aaron, Executive Vice President and Chief Financial Officer, BorgWarner: Yes. So we were really happy, obviously, with our Q2 performance. And just to unpack some of the numbers, we were down about $30,000,000 year over year in sales. We were down $8,000,000 in income. But as you mentioned, Ryan, that included $15,000,000

So operationally, we performed extremely well. And we really capitalized on all the opportunities in front of us. Joe mentioned 31% increase in light vehicle e product growth, and we converted in the mid teens on that extra revenue. It was a great job by our Power Drive Systems team to really capitalize on that growth. On top of that, our other businesses continue to focus on cost controls, things like supply chain savings, productivity, restructuring savings.

In addition to that, we’ve seen a reduction of 20% in cost of poor quality, things like expedited freight, scrap, etcetera. So it’s a combination of all of those things that led to a great Q2 result. We’re really pleased. On top of that, what you’re really seeing from us is a sustained margin profile of 10% or higher on a BorgWarner, Inc. Level, and we’ve seen that over the last five quarters.

That’s something Joe and I are really proud of. We want to make sure that we maintain that level of excellence going forward.

Unidentified speaker: Great. Thank you. And I wanted to ask about capital allocation. Obviously, you had some big announcements on the recent earnings call we just discussed with the dividend raise capital, the repurchase authorization increase, sends a strong signal about your intention to return capital to shareholders. Just given the acquisitions that you’ve made, which has really rounded out the portfolio on the e product side and allowing you to post organic growth that we talked about and to win the awards that you’ve been winning.

And also maybe considering the EV slowdown, it’s not growing as quickly as before. How does that position BorgWarner for the allocation of free cash flow going forward relative to pursuing inorganic growth opportunities versus return of capital?

Joe Fadul, President and Chief Executive Officer, BorgWarner: So maybe I’ll address the M and A topic and Craig can answer the return of cash to shareholders. So we are active in the M and A space for a company like BorgWarner that’s very strong financially and also operationally, especially now we see some opportunities that be very interesting. With that said, we have three criteria that we are looking at acquisitions through. The first is any acquisition must have really strong industrial logic. So linking and leveraging our core competence as a company, we want to make sure it’s a good fit.

The second is we want to see near term accretion. So different from five or six years ago where we really had to reposition the portfolio and we had to do some heavy lifting to get there, we’re in a lot better space. So having near term accretion is really important. I mean, you think about it, at the end of the day, we want to enhance and grow the earnings power of the company. The third thing is valuation.

We want to be thoughtful, have a valuation that makes sense, pay a fair price for something, not overpay, which requires to run quite a few scenarios given the volatility in the market space. So quite frankly, we’ve passed on a number of targets that didn’t meet one or more of these criteria. And I think that’s the discipline you can expect from Craig and I on a go forward basis. Yes.

Craig Aaron, Executive Vice President and Chief Financial Officer, BorgWarner: And just to dig a little bit deeper on capital allocation. Joe and I were very explicit in our Q2 earnings call. You should expect consistency and discipline from us from a capital allocation perspective. And as I look at Q2, that’s what I see. I see that we returned $130,000,000 of cash to investors through our share repurchases and dividend.

On top of that, we’re really excited about the decisions of our Board of Directors to increase our dividend 55%, increase our authorization $641,000,000 to $1,000,000,000 It gives us a lot of flexibility as we move forward. So we’re going to continue to focus on that consistent consistency and discipline as we move forward. We’re operating from a position of strength. We have really strong liquidity. We’re going to generate about $750,000,000 in free cash flow at the midpoint of our guidance.

It gives us a lot of opportunity to do it all. We can buy great accretive assets. We can return cash to shareholders through our dividend and repurchases. We can do it all. And it’s something that I think is really unique about our company and something we’re really proud of.

Unidentified speaker: I wanted to ask too about maybe the less need for transformative or non near term accretive acquisitions on the e product side, if that might open up two avenues for investing more in organic growth, maybe on the foundational side of the business, perhaps especially in light of the relaxation of the enforcement of the greenhouse gas and corporate average fuel economy standards with automakers announcing not only are ICE products likely to be around for longer, but that they may now receive new investments. GM, for example, recently announced investing in a sixth generation of V eight engines in Tonawanda. How might BorgWarner be positioned to compete for this business, not necessarily that program. But with some of your competitors, I think you’ve said in the past, maybe have pulled back on ICE investments. What do you think the potential could be for rekindling the organic growth machine on the foundational side?

Joe Fadul, President and Chief Executive Officer, BorgWarner: So if we go back twelve months ago, this was one of the main changes we made in our strategy, and that is to leverage growth across the entire portfolio. So we ask our turbocharger business and our thermal management business and our four wheel drive business to outgrow their specific end markets. So you can’t do that unless you’re investing and winning new business. Fortunately, we’ve seen a significantly higher flow of RFQ activity, especially in this market and in Europe versus a year ago. OEMs are getting clarity on their cycle plans.

Some of the announcements we’ve made in the second quarter, I think, highlight what those customers are looking for. So some of them were turbocharger extensions and four wheel drive extensions for North America. We announced some turbo businesses, both extensions and some conquest business, which we’re really pleased about. One of those conquest businesses was here. One was in Europe.

We’re also seeing an increase in advanced hybrid activity in this market. So in the second quarter, a few of our announcements were around some products serving advanced hybrids. So for us, we feel we’re in a great position to really outgrow our end markets across our entire portfolio. We do see the regions continuing to separate a little bit and what types of products they want. But I think that’s the beauty of both our portfolio and our operating model.

We give our teams room to run and chase the RFQs and invest and win the business needed to keep them healthy and sustainable. The only target we ask them to meet is an ROIC of 15%. So we continue to see success there.

Unidentified speaker: Maybe moving to China, where your mix of revenue coming from the domestic Chinese automakers is amongst the highest of The US based suppliers at roughly 75%. It’s actually above the 60 to 65% that I think that COEMs currently command and far above the 40% that the average S. Based supplier is levered to those companies. So a couple of questions around that. Maybe just starting with how have you managed to align yourself so strongly with those faster growing domestic Chinese automakers?

And what might that imply for your growth in China going forward?

Craig Aaron, Executive Vice President and Chief Financial Officer, BorgWarner: Yes. So we have a really strong China business. We’ve been there for over thirty years. And just to ground everybody in some numbers, about 20% of BorgWarner sales are within China. And when you think about that 20%, 75% is with local OEMs.

So we have a strong presence locally. It’s really about a couple of things that Joe mentioned earlier. Why are we successful in China? We provide great technology to that region of the world. And also, we are able to run with speed.

They launch programs in half the time of the Western world, so it’s really important that we run shoulder to shoulder with them, and that’s the feedback that we hear from our customers in China. So it’s very natural for them to move for us to move with them. We were a strong customer on the foundational business. So as their cycle plans changed and their portfolios changed to e product, it was very natural for us to work with them.

Unidentified speaker: And then maybe as a follow-up, we’ve heard from some other suppliers at the conference and elsewhere that the fastest growing automakers in China, including Xiaomi and BYD for example, they know that all the suppliers want to be aligned with them that they have the growth. So they’re able to command very strong price concessions and strong very favorable payment terms. There’s been some concern about the low margins and long payment cycles and some of the fastest growth parts of the China market. I read an article recently about how the government planners had summoned the automakers in and asked them to please start paying your suppliers on a more standard basis, a little bit more regularly. What’s your sense of that dynamic?

And how do you go about generally sort of balancing the fantastic growth opportunities in China and other parts of the market too, but with as well the need to maintain the commercial and financial discipline that you’re known for.

Craig Aaron, Executive Vice President and Chief Financial Officer, BorgWarner: Yeah, mean, it’s a competitive market. There’s no doubt about it. Cost controls are important in that market to make sure that we can hit our 15% ROIC hurdle. With that said, you know, the R and D intensity in China is different. You know, they value getting to market quicker, and that means less R and D activity.

When you think about a Western world award, we’re going to have three years of R and D intensity. In China, you might only have a year or nine months. So there’s less R and D intensity. They’re willing to take a ready made product, tweak it a little bit, and get to market. And so that’s the dynamics in that market.

And we’ve been really successful winning business and still achieving profitability hurdles, 15% ROIC or higher in that dynamic market. So we’re pretty proud of that.

Unidentified speaker: Great. Thank you. And I wanted to check-in on the non automotive battery pack opportunity. Most of your business in this area today is with electric buses, right, coming out Akasol. You’ve talked at various times before about the opportunity in different industrial end markets, probably not light vehicle, but interested to hear your thoughts.

Maybe you didn’t pursue these opportunities as aggressively before because of capacity constraints. Just with the expansion of battery pack assembly to Seneca, maybe give us an update on that. And maybe with a bit of a slowdown too in the commercial vehicle market, I’m not sure if that applies to buses, let us know, certainly commercial trucks. Where do you stand with regard to the opportunity to supply in some of these more diverse industrial and or other end markets?

Joe Fadul, President and Chief Executive Officer, BorgWarner: So it’s a little bit early to talk about some of the other applications and end markets. You’re right. What we’ve been focused on is the CV truck business, both in Europe and here, also the bus business. So we have seen some slowdown in the demand, which we reflected in our call. And what I’m really proud about is how quickly the teams are reacting to the near term volatility in those markets.

So if I just look at second quarter as an example, we were slightly EBITDA positive in that business, cash flow neutral. So from Craig and my seat, teams are doing what they need to adjust to the new market realities, at least in the short and midterm.

Unidentified speaker: And since we touched on commercial trucks, maybe just give us a bit of an update what’s going on there. Remind us of your overall exposure to commercial trucks. And obviously a bit of a slowdown in North America. On the other hand, we’re hearing South America is kind of holding up better. Europe even better than North America too.

Maybe take us a little bit around the world. I don’t think you’re huge in China, but North America, Europe.

Joe Fadul, President and Chief Executive Officer, BorgWarner: Yeah. So commercial vehicle makes up roughly 16 of our overall business. That includes off highway business globally. So that’s a market that has been down for some time globally. We see some opportunities, especially with pre buys on the technology side likely going to be in this market and in Europe.

But for us, we stay focused on what we control. We expect that that market is going to continue to be stable and also adopt more and more of the technology in our portfolio.

Unidentified speaker: And there was a time where there was a lot of excitement around electrification and commercial trucks too. You had companies like Hyliion and whatnot coming out of nowhere. Just curious if you’ve seen the same sort of EV slowdown on the commercial vehicle side as you have on the light vehicle side, and if there’s a difference in terms of geographical outcomes like on the light vehicle side?

Joe Fadul, President and Chief Executive Officer, BorgWarner: So we’ve definitely seen some slowdown. I mean, that’s reflected in our commercial vehicle battery business. It’s been more in this market than I would say in Europe, although Europe is down slightly. There’s really two pieces of that market that we’re serving. One is commercial vehicle, the other is bus.

The bus market actually has held up quite well. These buses are typically purchased by more local municipalities that may have incentives to get to a cleaner bus architecture. So that particular piece of the market is doing Okay in our view, especially in Europe where you think about the regulations by 2030 where over 90% of the buses need to be electrified. We feel pretty optimistic there. It’s more this commercial vehicle side, especially in this market with the incentives lacking.

And quite frankly, at the end of the day, all the requirements were on the commercial vehicle makers, not on the end user. So it was left up to the end user whether they wanted to invest in these electrified buses. And hence, short term, we’re seeing a slowdown.

Unidentified speaker: Great. Thanks. And going back maybe to the decision to exit the charging business, it’s part of the underlying margin improvement. Are there other areas in the business where you may look to strategically exit? Or what would you say that charging business exit says about how you will manage business lines that you do keep in terms of how you balance the long term potential on the one hand versus near term margin, return expectations, etcetera?

Joe Fadul, President and Chief Executive Officer, BorgWarner: Yeah, maybe just to recap the charging business decision. First, it was a very difficult decision for us to take. If you look at that market, it continues to be very disaggregated, a lot of competitors. And frankly, the growth in the segments we were serving wasn’t what we expected when we did the initial acquisition. So we didn’t see really a path in the near or midterm to reach our ROIC targets.

So we took difficult decision to exit that business, sell pieces of it, close other pieces of it. I think that’s the type of discipline you can expect from Craig and I on a go forward basis. So we’re constantly reviewing the portfolio for opportunities to strengthen it or to maybe exit areas that we don’t believe we can be a market leader and achieve our 15% ROIC.

Unidentified speaker: Helpful. Thank you. And with the expected volumes for EVs now being less and maybe also given that the price premiums that EVs command over ICE vehicles has come down, it seems that automakers that had previously desired to manufacture EV components in house, they might be more open to lower cost, less vertically integrated solutions. Are you seeing any confirmation of that? And does this increase the opportunity for BorgWarner going forward?

Joe Fadul, President and Chief Executive Officer, BorgWarner: Yeah, frankly, that’s not a question we get as we did a couple of years ago. We think the insourcing versus outsourcing is somewhat stabilized. You have some OEMs who announced they wanted to be fully insourced on the drive module. And they from what we see, they’re issuing RFQs for certain applications for either components or systems. So we think it’s going to move around a little bit over time, but it’s really not a material change in how we’re serving those markets.

We’re a firm believer that you’re going to continue to need scale, great technology, and move fast to get cost out of these EVs and really to serve the end customers. So it’s very difficult for us to see too many OEMs that are going to be able to build the scale needed like BorgWarner can.

Unidentified speaker: You mentioned that we’ve got more clarity now with regard to the regulatory environment when it comes to emissions. And we’re getting more clarity on tariffs. And curious if because we had such less bidding activity in the last year and a half or so, and maybe you’ve seen some improvement already, but if it could be almost like a flurry of activity in the back half of the year here. And if that’s confirmed by your conversations, in what way are you positioned to maybe capitalize upon an increase in bidding activity?

Joe Fadul, President and Chief Executive Officer, BorgWarner: Yeah. So it is true. I mean, there was, I’ll call it, a quiet period while people were trying to figure out what to do since bevs were not taking off, especially in this market and to a lesser degree in Europe. But as we mentioned, the OEs seem to have great clarity now. The RFQ flow is significantly higher.

So we’ve prepared ourselves to serve those RFQs. I think second quarter is a great example of the number of wins and the breadth of our wins across the globe and in this market across combustion, especially advanced hybrid applications. So we think we’re in a great position to continue to win. And that’s really what we’re focused on is winning new business across the entire portfolio. As we mentioned, that’s a change we made about twelve months ago to not just focus on the e growth but to leverage outgrowth across all of the businesses.

Unidentified speaker: As I think about how the tariff story has unfolded this year, I I feel like the headwind has maybe not been quite as great as was imagined. And then relative to the burden sharing by suppliers and the cooperation with the automakers, I think that’s worked out more positively than many had feared as well. Just curious what you are thinking as you look ahead to July 2026 with the USMCA renegotiation and of course we don’t have a lot of visibility, but do you feel like, well first of all, can hazard a guess what might happen, But secondly, does the manner in which the industry has responded to the tariffs that we have had in place, even though there’s been a lot of USMCA exemption, is that form a bit of a pattern for how we might expect automakers and suppliers to cooperate post July 2026?

Joe Fadul, President and Chief Executive Officer, BorgWarner: So wow, 2026 seems so far away, given how fast the business moves. It is true. I think most suppliers have found a way to work with the OEMs to either mitigate the impact of tariffs or to gain recovery. Obviously, the OEMs so far seem to have decided not to pass all that through to end customers, maintain pricing, which I think has helped the industry to maintain volume. That’s one of the reasons we improved our outlook for this market and we continue to see strength in the third quarter releases.

Longer term, we’ll just have to see how it plays out, how the OEMs change their view, what they’re going to pass through or not to the end customer. Of course, our teams are working hard on finding solutions to the tariff impacts, right? How to mitigate it, resource activities, if we need to maybe change where we’re building a product. So that’s what we’re focused on the mid to long term to find ways to mitigate some of the tariff impact.

Unidentified speaker: Great. Thanks. I’ve got some more questions. Are there any in the audience? One up front, please.

I’m coming. We can hear you, but the webcast folks need the microphone.

Ryan: Thanks for the update. Just to follow-up on Ryan’s earlier question. With the RFQs picking back up and the highlights that you mentioned in 2Q, can you give us kind of an update on the growth over market? You mentioned growth above your end segments. What are we thinking about right now in terms of foundational versus your e products?

It sounds pretty positive. And so just on those two segments, what’s the growth over market that you’re kind of thinking about over the next two years? And then more importantly, given the fast paced of China sourcing, could your third year out actually be getting to a higher level of growth over market? Any clarity on that?

Joe Fadul, President and Chief Executive Officer, BorgWarner: Yeah. So we have seen over the last few years our outgrowth has been in that 1% to 2% range. This year, you can expect something similar, a little bit closer to 1%, 1.5%. Our target is higher than that. Our internal goals that we’ve set for our businesses, and frankly they’ve set for themselves, is to have stronger outgrowth.

So we haven’t announced externally what that number is. But we see great opportunities on both sides. I’ll give you a couple of examples. If you look at the penetration of turbochargers in this market, it’s north of 50%. In Europe, it’s north of 90%.

In China, it’s 75%. So we still see opportunities for penetration increases as an example. In China, I would use four wheel drive as an example. So it’s in the single digit. Compared to here, it’s 45% roughly.

So as those OEMs especially want to export more and serve some of the various markets, especially in Asia, South America, Europe, we think the penetration opportunity for four wheel drive, there’s still a lot of room for growth there. So the foundational business, we’ve asked them to outgrow their end markets. We think there’s good opportunities. I should also mention growing market share, obviously, is one lever.

Ryan: And just one quick follow-up on China. Undoubtedly, one of your Chinese customers is going to do much better than you think, and one is going to do a lot worse. It’s just the nature of those customers. It sounds like from a cost structure standpoint, you’re kind of selling the same product. I’m simplifying.

But relative to the market share volatility, that’s not going to have that big an impact on your China margins. Is that an overstatement, or is that kind of how you’re running that business?

Craig Aaron, Executive Vice President and Chief Financial Officer, BorgWarner: Yeah. Obviously, we’re working with the top six China local OEMs in that region of the world. Some are gonna probably do better than others. I think our focus is a support those customers to try to be successful. And as you see that volatility, it’s all about making sure we have flexible equipment so that we can quickly pivot if we need more capacity for one customer or the other.

Ryan: That’s great. Thank you.

Unidentified speaker: Yeah. Any more questions in the audience? We do have one toward the back. The webcast folks need the microphone. Thanks.

Unidentified speaker: Curious on the 10% margin target that you guys have spoken to or 10% kind of as a floor coming out of the second quarter for five quarters in a row here. Is that a level that you think could be a quarterly floor from here? Or is it more of an annual floor to aim for?

Craig Aaron, Executive Vice President and Chief Financial Officer, BorgWarner: Our focus is convert in the mid teens, convert in the mid teens. You know, Joe and I are really trying to drive consistency, consistency in our p and l, consistency with how we allocate capital. So that’s our goal going forward. I’m really happy with our performance over the last five quarters, and I don’t see a reason why that shouldn’t continue as we move forward.

Unidentified speaker: Maybe in a couple of minutes here remains, I’ll ask some questions around relative strength within the very strong e product portfolio. Is there one product or a couple of products that are growing substantially faster? I mean, I feel like the 800 volt silicon carbide inverter just seems to have stronger traction. You let me know, maybe it’s electric motors. And then also, are there areas where you maybe have a higher relative exposure compared to the industry?

For example, is your share the same when it comes to integrated drive modules and components and systems that support that versus e beam axle, etcetera? Where are you seeing this growth relative to the industry?

Joe Fadul, President and Chief Executive Officer, BorgWarner: So if you think about our e products, starting on the traction side, inverters, motors, and then complete drive units, we continue to grow the business and grow share. So we’re in a very good position in our view. Some of the other products that we serve the e market with, like high voltage coolant heaters, we’re number one in that market today. So over seven years, we went from zero revenue, no products, to being a market leader today, which we’re really proud about. So we continue to leverage our core competence, work on new products, whether it’s cooling technology or it’s propelling the vehicle forward.

As you know, we don’t break out market share by product line. But it’s safe to say we focus on being a top three player in anything we do. Why is that? Well, when you’re in the top two or top three, you have scale, you can reinvest in the business, you can maintain a margin profile that’s acceptable to BorgWarner. So that’s what we’re focused on, on all these new products.

We want to scale them and grow them so that we can be one of the top three players.

Unidentified speaker: I thought one of the things that Fred used to say that resonated with me, he said that BorgWarner aims to be a trusted powertrain advisor. By being strong on the EV side and on the ICE side, you just want what’s in the best interest of the customer. We’re not here to sell you a turbocharger. All we do is sell turbochargers, right? But also, if you’re strong in IDMs and you’re strong in EB MAXs, we’re not an EB MAXs company here to sell EB MAXs.

We’ll work with you to find the best solution. Do you feel that that strength all around in the portfolio actually helps all the different parts?

Joe Fadul, President and Chief Executive Officer, BorgWarner: We absolutely think that’s true. So what Fred’s getting at there is we’re not just a one trick pony trying to sell one product line. We see, as we move toward electrification, we’re actually taking on more subsystems and more systems. So we understand the trade offs that the OEs are making to meet the performance of their customers. And I do think that builds trust.

I think they view us as a partner that not only understands how they work and how they operate, but we can trade off the engine architectures to make sure we serve them with the right technology.

Unidentified speaker: Okay. And so with that, we are a little bit over time. So please, everyone, join me in thanking Joe, Craig and Pat for the great color and insight.

Joe Fadul, President and Chief Executive Officer, BorgWarner: Thank

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.